Indonesia Stocks Plunge as Foreign Selling Intensifies, Mirae Asset Warns Domestic Risks Now Outweigh Global Fears

JAKARTA, Investortrust.id — Indonesia's stock market extended its sharp selloff on Tuesday as foreign investors continued to pull money from the country's financial assets, sending the Jakarta Composite Index down nearly 2.7% and highlighting growing concerns that domestic economic risks have eclipsed fading geopolitical tensions.

The benchmark index dropped to 5,663.64 in late morning trade, while the rupiah weakened to around Rp17,898 per U.S. dollar, underscoring mounting pressure on Southeast Asia's largest economy despite improving global risk sentiment.

The latest market rout suggests investors are shifting their focus away from geopolitical shocks and toward Indonesia's domestic fundamentals, including currency stability, fiscal health and capital flows.

Analysts say Indonesia now faces the challenge of rebuilding investor confidence just as the prospect of higher U.S. interest rates continues to draw capital toward dollar-denominated assets.

Foreign Selling Hits Indonesia's Biggest Stocks

The selloff was led by Indonesia's largest banks, which carry the heaviest weighting in the Jakarta Composite Index.

Shares of PT Bank Central Asia Tbk (BBCA) fell about 2.4%, while PT Bank Mandiri Tbk (BMRI) and PT Bank Rakyat Indonesia Tbk (BBRI) lost roughly 1% each. Continued foreign net selling accelerated the decline, pushing the benchmark briefly toward the 5,600 level.

Market participants remain cautious ahead of key U.S. economic data that could shape the Federal Reserve's next policy decisions. Although tensions in the Middle East have eased, investors remain focused on whether the Fed will keep interest rates higher for longer.

Domestic Risks Now Dominate

PT Mirae Asset Sekuritas Indonesia, one of the country's leading brokerage firms, said global geopolitical risks have moderated but warned that Indonesia's domestic challenges have become the primary driver of market sentiment.

Speaking during the firm's "Fear vs Fundamentals: Where Is Indonesia Really Headed" media briefing in Jakarta on Tuesday, Head of Research and Chief Economist Rully Arya Wisnubroto said markets remain constrained by expectations of tighter global monetary policy.

"Easing geopolitical risks provide positive sentiment for financial markets. However, expectations that the Federal Reserve will continue raising interest rates through the end of the year mean global monetary conditions are likely to remain tight, keeping market volatility elevated," Rully said during the event.

Mirae Asset expects the U.S. Federal Funds Rate, currently at 3.75%, to rise by another 25 basis points in both September and December, reaching 4.25% by year-end.

At the same time, the brokerage revised its 2026 global economic growth forecast to 3.1% from 3.3%, while trimming Indonesia's growth projection to around 5.0%, slightly below its previous 5.1% estimate.

Investor Confidence Is the Key Variable

Rully said Indonesia's market recovery will depend less on external developments and more on domestic policy credibility.

He pointed to continued pressure on the rupiah, fiscal conditions and growing concerns over a potential twin deficit, after both the current account balance and financial account weakened during the first quarter of 2026.

"Going forward, Indonesia's market recovery will be determined largely by investor confidence in domestic policies. Investors should stay focused on fundamentals and be more selective in their investment strategies," he said.

The concerns come as foreign institutional investors continue reducing exposure to Indonesian assets following persistent currency weakness and questions surrounding capital inflows.

Investor sentiment has also remained fragile after MSCI's 2026 Market Classification Review retained Indonesia as an Emerging Market while highlighting issues including ownership transparency, fair price formation and overall market quality.

Diversification Takes Center Stage

Against the backdrop of heightened volatility, Mirae Asset urged investors to diversify portfolios across multiple asset classes.

Head of Fund Services Francisca Gerungan said investors should align portfolio allocations with their financial goals, risk tolerance and liquidity needs rather than relying heavily on a single asset class.

"Diversification helps investors manage risk while continuing to capture investment opportunities under different market conditions. By combining the right instruments based on their risk profile, investors can build a more balanced portfolio for long-term financial objectives," Francisca said.

To broaden investment choices, Mirae Asset said it has expanded products available through its M-FUND by Mirae Asset investment platform, including the launch of Syailendra Sharia Fixed Income Fund (SSFIF) Class A, an Islamic fixed-income mutual fund investing primarily in government and corporate sukuk.

Wholesale Distribution Manager Vania Yoshe Apriliza of Syailendra Capital said the fund targets conservative to moderate investors seeking exposure to Sharia-compliant fixed-income securities.

"We hope SSFIF's availability on M-FUND will provide investors with more choices to build diversified portfolios that match their investment objectives," Vania said.